Oct 24 (Reuters) - Euro zone government bond yields

slightly extended their previous day's rise on Friday, as

investors remained cautious ahead of key economic data from both

the euro area and the U.S. later in the session.

Purchasing Managers' Index readings from France, Germany and

the wider euro area are due Friday morning, while the U.S.

Bureau of Labor Statistics is set to release its inflation

report later in the session.

Germany's 10-year Bund yields were up 0.5 basis points (bps)

at 2.58%.

Borrowing costs on both sides of the Atlantic rose on Thursday

after U.S. sanctions on Russia prompted a jump in oil prices

stoking inflation concerns.

Benchmark U.S. Treaury 10-year yields rose one bp to

4.0% in early London trade, after rising 3.5 bps the day

before.

Money markets priced in a 60% chance of a 25-basis-point ECB

rate cut by July. The key rate is seen at

1.84% in December 2026 from the current

2%.

Germany's 2-year yields, more sensitive to

expectations for ECB policy rate outlook, rose 0.5 bps to 1.94%.

The yield gap between safe-haven Bunds and 10-year French

government bonds - a market gauge of the risk

premium investors demand to hold French debt - was at 79.50.

It hit 87.96 bps earlier this month, the highest level since

January 13, on concerns about the French fiscal outlook but fell

to below 75 bps after Prime Minister Sebastien Lecornu survived

two no-confidence votes in parliament last week.